When faced with accelerating change, an unending series of disruptions, and urgent challenges, supply chain executives should consider adopting an “offset strategy,” says Ken Chadwick, vice president and analyst at Gartner. Chadwick used this unconventional advice to kick off Gartner’s annual Supply Chain Symposium in Orlando, Florida, on Monday.
An offset strategy involves compensating for a disadvantage by changing the circumstances under which you are competing or by implementing an unconventional approach. You use it to counteract a force you cannot control when you cannot win using traditional strategies, according to Chadwick.
“An [offset] strategy changes your position to a more favorable footing that enables the application to strengths to a problem that is otherwise vexing,” explained Chadwick during the opening keynote address. “[It] seeks to deliberately change an unattractive proposition to one that is more advantageous.”
According to Chadwick, to implement an offset strategy, you need to first be able to sense the changes and problems happening in the environment around you. Then you need to shift to an untried or unconventional strategy, different from the approach you might typically use. That unconventional strategy helps to steer your future response.
Chadwick said that an offset strategy is essential for responding to five key challenges that supply chain executives are facing today: worker cognitive overload, evolving customer expectations, technology change, supply chain cyber risk, and energy instability.
Cognitive overload: According to Gartner’s research, 83% of the workforce feels overwhelmed, as the supply chain and business environment continues to become increasingly complex. One strategy for offsetting this complexity is to deliberately simplify the decision-making process. This can be accomplished by using technology such as artificial intelligence and machine learning to automate some decisions or to constrain some of the elements of decision making, such as the number of escalations allowed, the number of people involved, the information gathered, or the time allotted to make the decision.
Evolving customer expectations: Customer needs are rapidly evolving with many consumers indicating that in the future they expect to see more customized products and solutions and more ethically and sustainably built products, even if they cost more. To meet these changes, companies will need to shift from strategies that prioritize cost reduction and efficiency to those that center the customer. Chadwick labeled this shift as moving from “just-in-time” to “just the customer.” This shift might, for example, involve changing sourcing priorities from driving down costs to delivering greater value to the customer.
Technology change: According to Chadwick, supply chain organizations do not have a good track record when it comes to getting the most out of their technology. To prove his point, the analyst cited Gartner research that shows that 88% of companies say they have made significant investments in technology to leverage data, but 83% say decision making has not improved significantly as a result. To buck this trend, supply chain leaders must focus less on the technology itself and more on embracing and adopting the technology. This requires not just integrating new technology into the current process but thinking about how technology can be used revolutionize how the process.
Supply chain cyber risk: With 80% of companies reporting that they have experienced a significant cyber security incident, it’s clear that the risks of cyber threats are rapidly increasing. Chadwick says that a cyber security strategy that focuses on compliance and following guidance from the IT department is no longer good enough. Instead, supply chain leaders need to take a more proactive role in in creating a cybersecurity strategy for the supply chain. Additionally, cybersecurity considerations need to be baked into business decisions, such as the supplier selection process.
Energy instability: Power outages caused by the ice storms in Texas in 2021 and the more recent outages in China due to coal shortages illustrate the weaknesses inherent in the traditional, centralized approach to energy distribution. Gartner urges companies to offset this instability by taking a more distributed, diversified approach to energy management, which may include renewables, microgrids, and battery storage.
“The five chosen areas are ripe for offset, ripe for underinvested or unconventional approaches that will change your competitive position,” Chadwick concluded. “Success in one will feed success in all, and the cumulative impact of all these offsets will change the game.”